Posts Tagged ‘deprivation’

Something I wrote for the What WorksCentre that I thought would be good here too.

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The What Works Centre for Local Economic Growth is three years old. So what have we learnt?

Two weeks ago we were in Manchester to discuss the Centre’s progress (the week before we held a similar session in Bristol). These sessions are an opportunity to reflect on what the Centre has been up to, but also to think more broadly about the role of evidence in policy in a post-experts world. In Bristol we asked Nick Pearce, who ran the No 10 Policy Unit under Gordon Brown, to share his thoughts. In Manchester we were lucky to be joined by Diane Coyle, who spoke alongside Henry and Andrew on the platform. Here are my notes from the Manchester event.

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Evidence-based policy is more important than ever, Diane pointed out. For cash-strapped local government, evidence helps direct resources into the most effective uses. As devolution rolls on, adopting an evidence-based approach also help local areas build credibility with central government departments, some of whom remain sceptical about handing over power.

Greater Manchester’s current devolution deal is, in part, the product of a long term project to build an evidence base and develop new ways of working around it.

A lack of good local data exacerbates the problem, as highlighted in the Bean Review. The Review has, happily, triggered legislation currently going through House of Commons to allow ONS better access to administrative data. Diane was hopeful that this will start to give a clearer picture of what is going on in local economies in a timely fashion, so the feedback can be used to influence the development of programmes in something closer to real time.

Diane also highlighted the potential of new data sources — information from the web and from social media platforms, for example — to inform city management and to help understand local economies and communities better. We think this is important too; I’ve written about this here and here.

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So what have we done to help? Like all of the What Works Centres, we’ve had three big tasks since inception: to systematically review evaluation evidence, to translate those findings into usable policy lessons, and to work with local partners to embed those in everyday practice. (In our case, we’ve also had to start generating new, better evidence, through a series of local demonstrator projects.

Good quality impact evaluations need to give us some idea about whether the policy in question had the effects we wanted (or had any negative impacts we didn’t want). In practice, we also need process evaluation — which tells us about policy rollout, management and user experience — but with limited budgets, WWCs tend to focus on impact evaluations.

In putting together our evidence reviews, we’ve developed a minimum standard for the evidence that we consider. Impact evaluations need to be able to look at outcomes before and after a policy is implemented, both for the target group and for a comparison group. That feels simple enough, but we’ve found the vast majority of local economic growth evaluations don’t meet this standard.

However, we do have enough studies in play to draw conclusions about more or less effective policies.

The chart above summarises the evidence for employment effects: one of the key economic success measures for LEPs and for local economies.

Second, some programmes are better at meeting some objectives than others. This matters, since local economic development interventions often have multiple objectives.

For example, the firm-focused policies I mentioned earlier turn out to be much better at raising firm sales and profits than at raising workforce head count. That *might* feed through to more money flowing in the local economy — but if employment is the priority, resources might be better spent elsewhere.

We can also see that complex interventions like estate renewal don’t tend to deliver job gains. However, they work better at delivering other important objectives — not least, improved housing and local environments.

Third, some policies will work best when carefully targeted. Improving broadband access is a good example: SMEs benefit more than larger firms; so do firms with a lot of skilled workers; so do people and firms in urban areas. That gives us some clear steers about where economic development budgets need to be focused.

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Fourth, it turns out that some programmes don’t have a strong economic rationale — but then, wider welfare considerations can come into play. For example, if you think of the internet as a basic social right, then we need universal access, not just targeting around economic gains.

This point also applies particularly to area-based interventions such as sports and cultural events and facilities, and to estate renewal. The evidence shows that the net employment, wage and productivity effects of these programmes tends to be very small (although house price effects may be bigger). There are many other good reasons to spend public money on these programmes, just not from the economic development budget.

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Back at the event, the Q&A covered both future plans and bigger challenges. In its second phase, the Centre will be producing further policy toolkits (building on the training, business advice and transport kits already published). We’ll also be doing further capacity-building work and — we hope — further pilot projects with local partners.

At the same time, we’ll continue to push for more transparency in evaluation. BEIS is now publishing all its commissioned reports, including comments by reviewers; we’d like to see other departments follow suit.

At the Centre, we’d also like to see wider use of Randomised Control Trials in evaluation. Often this will need to involve ’what works better’ settings where we test variations of a policy against each other — especially when the existing evidence doesn’t give strong priors. For example, Growth Hubs present an excellent opportunity to do this, at scale, across a large part of the country.

That kind of exercise is difficult for LEPs to organise on their own. So central government will still need to be the co-ordinator — despite devolution. Similarly, Whitehall has important brokering, convening and info-sharing roles, alongside the What Works Centres and others.

Incentives also need to change. We think LEPs should be rewarded not just for running successful programmes — but for running successful evaluations, whether or not they work.

Finally, we and other Centres need to keep pushing the importance of evidence, and to as wide a set of audiences as we can manage. Devolution, especially when new Mayors are involved, should enrich local democracy and the local public conversation. At the same time, the Brexit debate has shown widespread distrust of experts, and the ineffectiveness of much expert language and communication tools. The long term goal of the Centres — to embed evidence into decision-making — has certainly got harder. But the community of potential evidence users is getting bigger all the time.

The book takes a critical look at urban policy in the UK, particularly in the post-crash period, and explores the way thinking about regeneration has changed under austerity, and under localism.

It tests the idea that we’re now in a ‘post-regeneration’ era; it also takes a close look at the way communities and ideas of ‘community’ have been used to design, deliver and justify programmes on the ground.

My chapter covers the recent history of UK economic regeneration, sets out what we can expect programmes to achieve given the mega-trends shaping urban economies and communities, and also explores how the ‘what works’ agenda can help, both in developing the evidence base and in hands-on policy design. Cities and communities have been in tough times for years now, but I try to find some grounds for cautious optimism.

1/ Estate renewal programmes do a good job of improving housing, public space and physical amenities.

2/ Estate renewal programmes lead to increases in property and land prices and rents, although not necessarily for nearby properties that do not directly benefit from improvements.

3/ Programmes tend to have a limited impact on the local economy in terms of improving income or employment.

4/ Programmes tend to have a limited impact on the local area in terms of reducing crime, improving health, wellbeing or education.

Worse, we found no evaluations that were able to unpick effects on existing residents, as opposed to people moving into an area. This matters, because it means that – for example – area-level improvements in employment rates might simply be driven be people moving into the area, rather than real improvements in life chances for people already living there.

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A few thoughts on this.

First, as Ruth Lupton points out, we have to be careful to assess such programmes on what they set out to achieve. The main aim of estate renewal is usually to improve the quality of housing supply, the built environment and other local amenities. The review shows programmes are pretty good at achieving these. An important result.

Where such programmes score less well is on broader objectives. New Labour broadened estate renewal into a wider ‘neighbourhood renewal’ agenda – programmes like the New Deal for Communities included economic as well as social goals. The review included a number of independent and officially-commissioned NDC evaluations, and the results on these wider goals are not great. As John Haughton suggests, this is consistent with a larger body of evidence on ‘people’ vs ‘place’ interventions, and where views cut across the politicalspectrum.

It’s worth thinking a moment about why this might be. Urban economies are complex, and adjustment is hard to predict, sometimes chaotic. There’s clearly space for for neighbourhood regeneration programmes to try and deal with co-ordination problems, provide public goods, and try to mitigate some of the problems facing people in deprived areas.

On the other hand, these programmes are microsolutions for megaproblems: the economic elements of NDC are trying to roll back huge structural trends that two decades of national intervention under Labour more or less failed to shift. I’ve got a chapter coming out in this book, edited by Dave O’Brien and Peter Matthews, which talks more about these ‘regeneration expectations’.

Second, as John also says, it is important to understand in more detail *why* some estate renewal programmes have not delivered on their objectives. John suggests a few reasons: lack of community ownership, a lack of learning culture in the ‘estate renewal industry’, and shifting / conflicting central government priorities (a point also made by Ruth and others).

To dig into this, we need better quality impact evaluations (the What Works team used just 21 out of over 1,000 candidate studies). We also need to look through the complementary literature on programme process, implementation and management. The Centre has now started to do this – across a range of policy areas – and will be reporting back in the coming months.

Third, we need to set our expectations for such policies in the future. As a whole, regeneration programmes involve an implicit contract with communities, as Lee Pugalis and David McGuinness argue, and there remains a strong equity case for such initiatives. However, effective urban and neighbourhood policy is hard to design: neighbourhoods and cities are complex systems, which adjust in messy and uneven fashion. This creates space for policymakers – dealing with market and co-ordination failures – but also implies that impacts are likely to be incremental at best. That means presenting a realistic positive case for regeneration and estate renewal, rather than asserting economic transformations that stand little chance of coming about.

My last post talked about the principles of dealing with shrinking cities. This one concentrates on the practice. In DC a few weeks back, I had an informal chat on shrinkage with some of the Brookings Metro team (helpfully organised by Dermot, whose writeup is here).

For me, there were four big points from the discussion:

First, US cities are mainly ‘shrunk’, not ‘shrinking’. With a more mobile population, and severe contraction in the 1980s and 2000s, people voted with their feet. In the UK the picture’s mixed: historical data suggests that Liverpool’s population has fallen by over 300,000 since the 1960s, while Stoke’s has only dropped by 25,000.

That means the challenges are different. In the US, the big issues are repairing the physical fabric for remaining residents, and pooling jurisdictions so local tax bases can cover cash for public services. In the UK, tasks include promoting individual mobility, raising human capital and doing physical repair.

Second, the US approach is bottom up, not top down. This is partly historical: people have bad memories of government Urban Renewal programmes in the 1960s, which had a disproportionate impact on African-American communities. It’s largely institutional – the US system gives cities strong local leaders, typically Mayors, who in cities like Youngstown (est pop 73,000) and Flint (113,000) have led the public conversation and put forward new strategies.

The Obama administration has dipped a toe in the water, talking about ‘auto regions’ like Detroit, and ‘cities in transition’, but none of this has yet translated into action. By contrast, UK efforts like HMR have been Whitehall-led initiatives, essentially aimed at ‘doing something about those inner cities’.

Third, US programmes are less radical, and more micro, than you might imagine. In practice, policymakers focus on struggling neighbourhoods, more than whole cities. Empty houses and land are bought up, and there is selective demolition and rebuilding. Often areas are simply returned to meadows, or turned into parks and bikeways. Rather than actually ‘shrinking the city’, the aim is to improve the city that’s left – making it nicer and greener.

In the UK, however, many HMR pilots have tried to use housing market remodelling to stimulate area population and economic growth. Adding net housing when populations are shrinking does not feel wise.

Finally, finance differs. In the UK, Whitehall provides upfront funding to HMR, which leverages private sector borrowing – a funding model that’s now collapsed. By contrast, US improvements are often funded via county-wide property taxes or fixes like TIF – as I’ve pointed out, tools that UK city leaders don’t yet have at their disposal.

Closer to home, Leipzig’s story is instructive too. The second-largest city in Eastern Germany, it lost 100,000 people after re-unification (20% of its current population). In 2000 an expert commission on the city was established, led by Leipzig’s Mayor. The resulting strategy involved some demolition and remodelling of inner urban housing, plus a range of quality of life measures (e.g. allowing artists to take over derelict properties).

Leipzig’s population is about the same size as Greater Manchester, so the city also developed its market potential, with a modernised train station and airport. Overall, it has stopped shrinkage: the population has stablised, and there has been slight employment growth (largely driven by high-tech manufacturing investment, such as a new BMW plant).

Lessons

So what are the lessons for the UK? First, cities – not Whitehall – need to be in control of policy and process, proposing ideas and getting local buy-in. Often, the pitch will need to be about a better, greener place to live – not ‘renewal’ or ‘shrinkage’.

Second, the policy mix should combine place elements (remodelling neighbourhoods) with people elements (improving skills, helping residential mobility). My post last year suggested ‘removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and some honest repositioning’.

That still feels about right. Although compared with Flint and Youngstown, big cities like Liverpool have far larger domestic markets, and thus potential for further jobs growth. Leipzig’s story suggests there’s a role for demand-side measures in bigger places: Liverpool’s recent economic and population growth confirms this.

The proposed Decentralisation Bill therefore looks quite promising. Big city Mayors and Local Economic Partnerships, more open local planning, and proposals to build local social action are all useful; uniform local incentives for housebuilding less so. More seriously, local leaders will still lack the financial tools to deliver the kind of programmes carried out in the US and in Europe. The forthcoming review of local government finance should look to broaden councils’ toolkit, and widen their tax-raising base.

One final point. CLG and bodies like the HCA have critical system designer and enabler functions, supporting and advising local leaders and communities – if not dictating to them. Whitehall will need to lead on promoting any ‘right to move’ in the social housing system; and will still be providing direct funds for skills and education. Despite the Secretary of State‘s emphasis on ‘localism, localism, localism’ ‘localisation, localisation and localisation’ (thanks Grant!), I suspect central government will still end up with useful roles to play.

This is the first of two posts on ‘shrinking cities’, or as civil servants might put it, ‘places with a long history of economic underperformance’. In the UK, this means cities like Hull or Stoke-on-Trent with low average incomes and higher-than-average deprivation rates; abroad, places like Leipzig, Cleveland or Detroit.

Why now? First, during the 2000s a lot of economic development funding went into cities. But this has not always improved residents’ overall welfare. As the business cycle turns, city leaders are looking for new ways forward. Second, there’s now less regeneration money around. Between 2011 and 2015, central government departments like CLG may face 20-25% spending cuts. So Whitehall policymakers are looking hard at if, where and how to spend.

Spatial disparities exist, Storper argues, because there are benefits of clustering economic activity, and these persist over time. Agglomeration economies help explain why cities exist, and why they still matter. Theory and real world experience also suggest that long term convergence is unlikely.

The question for policymakers is what, if anything, we should do about this? Storper outlines three responses.

We could aim for ‘spatial equity’, compensating people and places who lose out. This feels appealing – but what does it really mean? Is holding successful places back fair to their residents? And how do we actually equalise outcomes? Even the UK’s very centralised public services haven’t got rid of postcode lotteries.

Another view is that we invest in poorer places. This is the traditional regeneration perspective. Structural economic change has long term impacts that markets won’t deal with – physical decay, poverty, crime. And there are efficiency costs to this – not least higher spending on benefits. Area-based policies tackle these externalities, get markets working again and places back on their feet.

This has been pretty much the UK approach for the past two decades. It’s given many cities a public makeover – and has made them nicer places to live. But most evidence suggests that improving places doesn’t easily translate into improving outcomes for people. Trickle-down regeneration works about as well as trickle-down economics.

A third view comes from urban economics, especially Ed Glaeser (and now, Richard Florida). In its simplest form, this says we should focus on people, not places. People are mobile; investing in their mobility and human capital improves their economic prospects. Investing in immobile places does not, especially as convergence is unlikely.

To me, this feels like the right starting point for policy. This view is also increasingly fashionable in UK policy circles, and partly explains the bad press traditional regeneration has been getting. But as Storper points out, it’s more complicated than it looks to implement. There are three big policy points.

First, it’s not clear everyone is truly ‘mobile’. People are free to move; but less skilled people have less information or resources to migrate between cities. Policy interventions might improve mobility, although we don’t have strong evidence here – increasing choice in the social housing system could help, also expanding housing supply in more successful places. Research and experiments should look to fill this gap.

Urban economists explain this in terms of spatial equilibrium. People sort by economic prospects, and prefer different kinds of communities. Low wages get traded off against low cost of living and/or better amenities. In spatial equilibrium local labour, housing and ‘quality of life’ markets all clear, so that real wages equalise across all places. Ongoing SERC research finds some UK evidence for this.

The spatial equilibrium approach implies we don’t need to worry so much about disparities in nominal income. But in some poorer places, especially given mobility barriers, we may want to adopt measures (better quality housing, tackling crime) which will improve residents’ wider wellbeing – and thus raise real incomes.

Finally, national politics and local delivery are both critical. The UK is generally less tolerant of inequality than the US. Our politics is steeped in notions of fair play and universal standards: we’re a long way from accepting apparently large income disparities on the basis of hard-to-explain equilibrium concepts.

British over-centralisation also makes it politically difficult to do anything about managing decline: London policy apparatchiks seem to be telling other cities what to do (which they are). This is one reason why the Housing Market Renewal programme has often been so painful, why Policy Exchange got in trouble, and why the Coalition’s emphasis on localism is important. In future, devolution and actually doing managed decline need to go hand in hand. I’ll explore these ideas further in the next post, and take a look at some international experiences along the way.

To Prospect last Monday morning for a breakfast seminar with economists Paul Romer and Paul Collier. We were there to discuss Romer’s idea of ‘charter cities’: a new form of aid in which a poor country invites a rich country to set up a city-size development zone, which it runs according to rich-country rules.

This might sound slightly eccentric – what’s wrong with just giving money? But both Romer and charter cities are worth taking seriously. In the 1990s, Romer was one of the originators of endogenous growth theory, which is now the basic framework for thinking about how economies evolve. He’d spent the past week in Davos, pushing the charter cities idea around. And during breakfast Paul Collier, one of the best development economists in the world, also gave it a qualified thumbs up.

Romer’s basic idea is simple. Strong rules and institutions help economic growth; so do cities. The world is urbanising: but in the global south, most people are packed into chaotic cities, often in slum neighbourhoods, which lack good governance and basic infrastructure. So poor countries need to set up new, city-size special economic zones with robust rules and institutions. Charter cities would allow partner countries to come in and run these cities for the common good, in theory accelerating economic growth and providing the basic housing and infrstructure citizens in poor countries need.

Collier gave the idea cautious support, although he warned it was ‘three leaps in one’ – running against development orthodoxy, and not easy to implement. Most people will live in cities in the future. In the south, coastal megacities will thrive because they have both scale and physical access to the global economy. Equally, good governance is critical to long term growth. There is already an international market in rules: in African partner countries, China typically uses dispute resolution agreements that refer to English law.

Much of the discussion focused on politics, and the need to set rules and local buy-in. I made three more urban points. First, if successful charter cities are coastal (like Hong Kong or Shenzhen Special Economic Zone), what can landlocked countries do? Romer suggested that a third country could as a ‘host’ – which works in theory but makes implementation very complex.

I left feeling at least partly convinced the charter cities idea could work. Chinese cities like Shenzhen or (in theory) Dongtan show what might be achieved within a single country with top-down (and non-democratic) government. However, in the rest of the world implementation is probably going to be a lot messier, and the results less clear cut. However, it’s probably worth a shot. As Haiti begins post-earthquake reconstruction, Dominican Republic (or French)-sponsored charter cities might be a useful tool in the box.

During the 2006 Liverpool Biennial, light and sound artist Hans Peter Kuhn projected a gigantic question mark over the Wirral suburbs (above). Everybody hated it. But in fact it’s an (accidental) artistic masterstroke asking the big questions about suburbia. What is it? What is it for? And if there are problems in suburban areas – and parts of Wirral are pretty deprived – how can we fix them?

My chapter, ‘Fixing Broken Suburbs’, looks at suburban deprivation and the prospects for renewal through the downturn and beyond. It’s worth reading this alongside Jim’s essay on ‘suburban renaissance’, which sets out some of the HCA’s early strategic thinking.

But what are the economic impacts of ‘quality of place’? Last week CABE and the RDAs organised a seminar to try and find out. The morning session had excellent presentations from my colleague Ben Rogers at CLG, Jim Bennett at the Homes and Communities Agency and Paul Hildreth from SURF. More on these in a moment.

By contrast, Paul defined quality of place as ‘what makes places work’ – ideas flow, infrastructure, big markets, skills, business-to-business links and so on. At a stretch, we could label this ‘quality of place’. But we now have an official definition that is much tighter.

This is a debate we need to have. Full credit to Tim for starting it (though I don’t agree with everything he suggests). In years to come regeneration funding will be severely squeezed. There won’t be enough cash to do everything everywhere – so we have to think through the feasibility of managing decline.

Two things stick out from the US coverage. First, the scale of abandonment in some American cities is scary. Buffalo’s population fell from 580,000 in 1950 to 279,000 in 2005. Rolls in Flint, Michigan have dropped from 196,000 in 1960 to 120,000 today: up to 25% of land is now abandoned.

Second, the policy response is a twist on ‘green growth’. As explained by Dan Kildee, Governor of Genessee County, he takes as much abandoned land in Flint as possible, largely through foreclosures. County-wide Tax Increment Financing is used to leverage the land bank, forward-funding demolition, refurbishment or conversion into parks, urban meadows and gardens.

Few British cities are as badly off as Flint. The historical data suggests Stoke-on-Trent’s population dropped just 25,000 between 1961 and 2001. Hull’s fell from 303,000 to 243,000 over the same period. Liverpool’s has declined massively – from 746,000 in 1961 to 439,000 in 2001 – although the economy and population have been stabilising in the past few years. Liverpool’s right-sizing may already have happened. By contrast, poorer cities and towns in isolated places – like Stoke, Hull, Barrow or Easington – are still struggling to find a role.

More importantly, what would it achieve? Proponents suggest greening an area helps stabilise house prices. It also improves quality of life for residents. But it’s not clear this provides a real basis for growth (Kildee optimistically suggests ‘entrepreneurial agriculture’).

What about encouraging people out? This might not be welfare-maximising. We would need to weigh up the economic gains (moving people to jobs, savings on physical regeneration) against the economic costs (moving people) and social losses (damaged social capital etc).

A sensible ‘shrink to survive’ strategy for the UK would involve: removing overcapacity in local housing; improving the local environment (which could include some US-style ‘greening’); levelling VAT rates on refurb and new build; developing local skills, access to employment and transport links to stronger labour markets; new funding tools; and as Dermot suggests, some honest repositioning. The Pennine Lancashire Pathfinder ticks most of those boxes.